Carbon offsetting: a user's guide

1 Aug 2007 by BusinessTraveller

Carbon offsetting has been the target of some vitriolic criticism in the past year: the offsetters have been labelled “snake-oil salesmen” and “carbon cowboys”, and a Channel 4 programme pointed to discrepancies between emissions calculators for flights. Yet at the same time, a recent report by the Environmental Select Committee criticised British Airways for not drawing more attention to its offsetting scheme, and Virgin for not having one in place. So is carbon offsetting part of the solution or part of the problem?

Should I be offsetting?

The message coming over loud and clear from the government, the green NGOs and the major offsetting companies is that reduction begins at home. In other words, before we think about offsetting, we should be doing everything we can to reduce our carbon footprints. Carbon Neutral, the first company into the offsetting market back in 1997, advises regular business travellers to start by implementing or campaigning for a company-wide green policy, which would involve cutting out unnecessary trips and choosing airlines with the best environmental record. Once this has been done, carbon credits can then be purchased to offset unavoidable emissions.

Sarah Brown, a spokeswoman for Carbon Neutral, insists: “Offsetting is one part of the solution. Solving climate change is like putting together a jigsaw, and offsetting is only one piece of the jigsaw.”

Penny Fox, at the Department of the Environment, Food and Rural Affairs (Defra), agrees: “Offsetting isn’t the first thing people should do – we should all try to reduce our CO2 emissions wherever possible. However, we have to be realistic that not all emissions will be avoided, and that’s where offsetting has a role to play.”

Does that mean planting a tree?

Almost certainly not. Trees were hugely popular in the late 1990s, but the problem is that they don’t permanently reduce carbon in the atmosphere; they merely store it during the life of the tree (a process known as sequestration). Thus, when the tree dies, the carbon is returned to the atmosphere.

Michael Buick of Climate Care, another major offsetter, says: “We realised pretty quickly that it’s better to fund projects where you’re actually preventing carbon from being emitted. We now accept that we can’t plant our way out of climate change and we’re focused on energy projects.”

On the plus side, tree-planting helped to raise public awareness of offsetting. Carbon Neutral’s Brown says: “Trees are easy to understand, and were a good way of engaging people and getting their attention.” Unfortunately, it’s proving equally tough to wean the public – and companies – off them now that the science has moved on.

If you must go down the leafy route, avoid simplistic “plant a tree” schemes and go for reforestation, which involves preserving and restoring the whole forest eco-system, not merely the trees. Calculating the emissions reductions from such projects is an inexact science even by offsetting standards, but they can also help to preserve rare species and reduce poverty in developing countries. Defra promotes the work of the Forestry Commission and the Woodland Trust, while Sir David Attenborough has given his backing to a rainforest preservation project in Belize sponsored by the World Land Trust.

What’s the alternative to trees?

Most reputable companies are now going for energy-based projects, which actually prevent emissions. These can be anything from fitting a widget on a chimney in China to subsidising solar-powered torches for midwives in India.

So which project should I pick?

This is where it gets complicated. There are two types of carbon credits, voluntary and regulated. Both have their limitations, and the choice of which to go for must ultimately be a personal one (some companies offer both).

The regulated market

This was born out of the first Kyoto Protocol, which set caps on greenhouse emissions for heavy industries in developed countries. Companies which failed to meet their target had the choice of paying a hefty fine, or purchasing credits from projects which were reducing emissions in developing countries.

To enable this, the UN established the Clean Development Mechanism (CDM) – those projects which meet its standards are known as certified emissions reductions (CERs), and can be used to meet the Kyoto targets. (One CER equates to an emission reduction of one tonne of CO2.) There is also a UN Gold Standard, reserved for those projects which both reduce emissions and encourage sustainable development.

One of the main requirements for these projects is that they should have “additionality” – in other words, they would not exist without carbon finance. For example, in most of the developing world energy production is largely based on fossil fuels, so any projects that use renewable energy would count as additional.

Many offsetting companies now offer consumers the chance to buy into CERs, which are typically large-scale projects, often involving hydro-electric or wind power. The obvious advantage of these projects is that they come with excellent credentials; the downside of the regulated market is that projects which may be equally valuable are too small to gain accreditation. This is where the voluntary market comes in.

The voluntary sector

Like the regulated market, the voluntary sector was born in the 1990s. As awareness of climate change increased, green-minded individuals were looking for a way to reduce their carbon footprint, and companies sprang up to meet this demand. Initially the cash was ploughed into trees, but today it’s more likely to end up funding low-carbon technologies in developing countries.

Carbon Neutral’s Brown explains: “A lot of the projects are based in the developing world – they have fast-developing economies, it’s cheaper to set things up there, and a lot of people are using highly-polluting fossil fuels because they aren’t on a national grid.”

One of Carbon Neutral’s current projects involves backing a company which is promoting solar-powered lighting to replace kerosene; similarly, Climate Care is using carbon finance to help Indian farmers move from diesel to foot-powered waterpumps. Both companies insist that this is financial support, not charity. Buick adds: “It’s best to think of it as transforming the market in favour of low-carbon technologies, rather than just handing out a few stoves.”

But if the market isn’t regulated, how do I know who to trust?

If the strength of the voluntary market is that it can work at a community level, the downside is the total lack of proper regulation, which lays it wide open to abuse. Indeed, the voluntary sector has recently come under heavy fire from all sides. Friends of the Earth Scotland accused some offsetting companies of being “carbon cowboys”, and Easyjet’s Toby Nicol commented that there are “too many snake-oil salesmen in the business”.

This may be true, but the lack of regulation is just as tough for the reputable offsetters, who are desperate to prove their green credentials. Several have signed up to the Voluntary Gold Standard, which is backed by Greenpeace, Friends of the Earth and the World Wildlife Fund; some also have external audits, or are verified by an independent third-party.

Is there anything else I should be looking out for?

Checking that a project has additionality is just as important in the voluntary sector, but it’s obviously much harder to do than in the regulated market. One thing you can do is look on Google – if you search under “Bulgaria” and “windfarms” and find there are hundreds, then you might want to make further enquiries about additionality.

Another issue is “double-counting”, where projects are sold twice by different offsetters. There’s not much you can do to check on this, although some offsetters, including Carbon Neutral, are listing their projects on a registry held by Bank of New York in an attempt to reassure customers.

Where do the airlines fit into this?

At present, few major carriers offer the option of offsetting when you book a flight – those that do include BA, SAS, Continental, Delta and Easyjet. BA was the first in the market and uses Climate Care, while Easyjet decided to cut out the middleman and buy CDMs direct for its recently-launched scheme. Silverjet prefers not to leave it to the customer, and includes an offset with Carbon Neutral in its ticket price.

Next up are Virgin Atlantic and Lufthansa, which have both pledged to have schemes in place by the end of the year. Responding to criticism from MPs about its failure to come on board earlier, a Virgin spokeswoman said: “We want to make sure we get it right. Carbon offsetting is complicated – it’s more than just planting trees. We’ll have a scheme by the end of the year, and it will be a scheme that leads the industry.”

Lufthansa also stressed the need for due diligence before joining the offsetting market. Marianne Samman, general manager UK and Ireland, said: “We are being careful. If we are recommending to our customers that they pay extra money for carbon offsetting, we want to make sure that we have a solution that matches our commitment to the environment.”

Why do I get different prices from different websites?

A recent Channel 4 Dispatches programme highlighted the fact that BA’s online emissions calculator gives a much higher figure for flights than Climate Care’s does. In fact, you can probably search for the same flight and get a different figure from every emissions calculator.

This may look suspicious but the explanation, once again, is that this is a fledgling and inexact science. Climate Care’s Buick says: “Dispatches seemed to imply that if the figure you get from one source doesn’t exactly match the figure you get from another source, you should throw up your hands in despair and not bother doing anything. The simple fact is that there isn’t a scientific consensus on how you calculate the climate impact of aviation, but that doesn’t mean we shouldn’t measure the impact as best we can with the best information we have.”

In the case of BA, the difference is simply that Climate Care uses a multiplier of two to take into account the non-CO2 impact of flying, and BA doesn’t – and there are climate scientists who would argue for both approaches. Buick adds: “If one calculator says three tonnes and another says four tonnes, no one’s being ripped off – it’s just that one person has bought four tonnes and the other person has bought three tonnes!”

Ultimately, it comes down to the issue of whether you trust the offsetting companies – if you want to do something about climate change and believe that their projects are genuinely reducing emissions, then the more cash you give them the better.

Shouldn’t the government be doing something to help?

Possibly, but for the moment it’s swerved the issue. Defra announced last year that it would launch a Code of Practice which companies could sign up to, and embarked on a consultation with the major offsetting companies. However, the latest indication is that this will only apply to CDM projects – which, of course, are already regulated.

So for the moment, if you want to make sure your money is being well spent, you’ll just have to do your own due diligence.